Forfeitures: When Uncle Sam Says You Can't Take It with YouAuthor(s): Anton R. Valukas and Thomas P. WalshSource: Litigation, Vol. 14, No. 2, WINNING WITHOUT TRIAL (Winter 1988), pp. 31-37Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/29759231 .

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Forfeitures:

When Uncle Sam Says

You Can't Take It withlbu

by Anton R. Valukas and Thomas P. Walsh Burden of proof on the defendant. Summary judgment based on inadmissible hearsay. Loss of a house for making a telephone call. Attorneys' fees vanishing as if by magic.

Welcome to the wonderful world of forfeitures, which, es?

pecially to the uninitiated, resembles a house of horrors. Courts used to say that the law abhors forfeitures. Today,

it is not so much the law, but drug dealers, racketeers, and criminal defense attorneys who abhor forfeitures. Congress, state legislatures, law enforcement agencies, and the courts seem more willing than ever to seize money, businesses, real estate, and vehicles from criminals, not-so-criminals, innocent relatives, and even defendants' unsuspecting counsel.

Procedural ghosts and substantive goblins lurk in the shadows of forfeiture law, terrorizing otherwise experi? enced attorneys who encounter these cases uninitiated. These lawyers find admiralty rules governing the seizure of real estate in Kansas and defendants facing the burden of

proof to show that seized property is not subject to forfei? ture. They discover to their horror that the government can take property on the basis of hearsay alone and that the assertion of the Fifth Amendment privilege may trigger an adverse judgment. Looming over all defense attorneys is the possibility that forfeiture even may prevent payment of their fees.

It is not only criminal defense attorneys who must be? ware of forfeiture law. Real estate lawyers, general practi? tioners, lawyers for banks or other financial institutions, and lawyers representing fraud or racketeering victims may find themselves in the clutches of federal forfeiture cases, as well. A number of states have enacted forfeiture statutes similar to the federal provisions, so it is harder to feel safe

anywhere.

Attorneys commit fatal procedural errors more often in civil forfeiture cases than in any other category of civil

litigation. Lawyers most often see forfeiture cases brought

Mr. Valukas is the United States attorney for the northern district of Illinois. Mr. Walsh is the deputy chief of the U.S. attorney's civil division in the northern district.

under the Controlled Substances Act or the Racketeer Influ? enced and Corrupt Organizations (RICO) statutes. But there are other federal forfeiture statutes, ranging from 31 U.S.C. ? 8318, which prohibits the undeclared importation of

monetary instruments in excess of $5,000, to 21 U.S.C. ? 104, which deals with the forfeiture of vessels used to im?

port diseased swine. To learn more about those less fre?

quently invoked provisions, consult Prosecution and De?

fense of Forfeitures (Matthew Bender 1985), a recently published treatise by David B. Smith.

Now down to brass tacks?not to mention silver candle? sticks, diamond rings, and steel office buildings. The gov? ernment can take almost anything through forfeiture pro? ceedings. Cars, planes, boats, money, bank accounts, busi? nesses, personal property, and real estate are all subject to forfeiture under one or more statutory provisions. As a Chi?

cago Sun-Times headline put it after a drug-related seizure in a Chicago suburb, "They even took my piggybank."

The civil, drug-related forfeiture law of the Controlled Substances Act, 21 U.S.C. ? 881, is used most often against three categories of property: (1) vehicles, (2) money and

any other form of drug proceeds, and (3) real estate.

The vehicle portion of the civil statute, ? 881(a)(4), al? lows forfeiture of cars and other conveyances used or in? tended to be used either to transport illicit drugs or in any

manner to facilitate the transportation, sale, possession, or concealment of illicit drugs. The government need show

only that the vehicle was "intended to be used" in violation of the statute.

And that may be easy. Consider the county court bailiff who supplemented his income by dabbling in cocaine sales. He forfeited his brand new Cadillac (he had driven it only 106 miles) when he drove to his supplier's house to make a

pick-up. Even though the authorities arrested the bailiff as he got out of his car and before he received the cocaine, the court found that he must have intended to get back into his car with the illegal goods after the purchase.

The "intended use" language appears in all of the civil and criminal drug-related forfeiture provisions. Maybe the

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drafters were inspired by religious preachers: Simply think?

ing about committing a sin is tantamount to committing it. The vehicle forfeiture provision is as strict as it looks.

Discovery of the smallest amount of illicit drugs in a ve? hicle justifies forfeiture, even if the drugs are not on someone's person. The Supreme Court has upheld the for? feiture of a yacht on which a single marijuana cigarette was found. Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663 (1974). Thus enforced, the statute is a useful

prosecutorial tool when the trace of drugs happens to sit in a drug dealer's car. Of course, prosecutors use discretion not to forfeit every vehicle that contains a trace of illicit

drugs. Both notions of fairness and of finite storage space impinge the federal government's enforcement efforts.

Cars and Money for Drugs But this law reaches still farther. Even a vehicle that is

clean of the smallest trace of illicit drugs is subject to for? feiture under ? 881(a)(4) if it is used, or is intended to be used, to facilitate illicit drug trafficking "in any manner." This includes bringing potential drug buyers to the scene of the transaction and use of the car to deliver money to a

participant. We recently seized a new Cadillac driven to a

pay phone to negotiate a cocaine deal that ultimately fell

through. The money provision of the civil statute, ? 881(a)(6),

authorizes the forfeiture of any proceeds traceable to illicit

drug transactions. In 1978, civil drug-related forfeiture ef? forts received a major boost when Congress amended the Controlled Substances Act to provide a new category of

property for forfeiture and liberally defined that category as

money or anything else used, or intended to be used, in

exchange for illicit drugs. 21 U.S.C. ? 881(a)(6). The "exchange money" provision is straightforward. As

with vehicles, mere intent to use the money is sufficient to

subject it to forfeiture, even if the money and drugs do not

actually change hands. This category of cases accounts for a large share of the federal government's cash forfeitures.

More and more, drug agents use so-called "reverse buys," in which they pose as sellers rather than buyers of drugs.

They engage a drug dealer to meet them at an airport. The

drug dealer arrives in a late model car with half a million dollars, expecting to meet a small plane loaded with co? caine. When the dealer shows up, Drug Enforcement Ad? ministration agents leap out of the plane and seize every? thing in sight, including a lot of currency from the aborted transaction.

We once seized an $800,000 house and its furnishings, including more than 40 oriental carpets, as "drug proceeds"

when the owner had negotiated to buy heroin from an undercover Drug Enforcement Administration agent. To convince the agent of his ability to complete the transac?

tion, the owner had taken him on a tour of his fortress-like home, boasting that the house and everything in it had been

acquired through drug-dealing. The "proceeds" portion of ? 881(a)(6) generates more

litigation than any other single section. The only limitation on the government's ability to take money or other things of value is the requirement that the proceeds be traceable to an illicit drug transaction. All sorts of property, from cash to real estate, have been seized. Section 881(a)(6) also has

led to the current dispute over whether money paid or about to be paid to attorneys should be forfeitable. We'll discuss that subject later.

The real estate portion of the statute has a shorter history. In 1984, Congress again bolstered the civil forfeiture provi? sions of the Controlled Substances Act by adding ? 881(a)(7), which authorizes seizure of real estate used, or intended to be used, to facilitate felony drug transactions.

Congress enacted the new law because under ? 881(a)(6) the government often found it hard to trace the proceeds of

drug transactions to real property. Now the government has gone into the real estate business in a big way. The United States marshal's service, which takes custody of property during forfeiture proceedings and disposes of it afterwards, has set up special offices in several major cities to handle all seized property. (Those offices also are equipped to seize and operate forfeitable businesses.)

The real estate provision is not triggered unless the drug involvement facilitates a federal felony. Still, the section reaches virtually any drug trafficking activity. Much may be forfeited: real estate used to store, receive, deliver, manufacture, grow, or process illicit drugs, as well as real estate used as a meeting place just to discuss drug sales. The use of a phone to arrange or otherwise facilitate a drug offense is itself a distinct felony under 21 U.S.C. ? 843(b), and that use can result in forfeiture of the home or business

property where the phone is located. Last year we filed a case against more than 20 pieces of real estate that included houses and commercial property used only for making drug-related telephone calls.

So far, we have analyzed simply the civil side of forfei? tures under the Controlled Substances Act. Before 1984, the only criminal drug forfeitures followed violations of the

Continuing Criminal Enterprise (CCE) statute, 21 U.S.C. ? 848, which applies to organizations involved in a series of

drug felonies. A conviction under the CCE statute means a minimum ten-year sentence, as well as forfeiture of "inter? est in, claims against, and any property or contractual rights affording a source of control over, the continuing criminal

enterprise." 21 U.S.C. ? 853(a)(3). This type of forfeiture

supplements any other forfeiture the law may authorize. Nevertheless, this part of the criminal forfeiture statute usu?

ally provides little financial value to the government. Since the CCE statute applies only to certain organized drug ac?

tivity, these cases seldom arise. Moreover, the typical criminal drug enterprise disintegrates as its members go to

prison for a decade or more.

Runners, Cashiers, and Lookouts When the statute is applied, however, it can have a

sweeping effect. Consider, for example, a Chicago heroin dealer who ran a business that involved a complicated sys? tem of curbside order takers, runners, cashiers, and look? outs. As a result of his CCE statute conviction, he forfeited his interest in 64 cars that he had purchased over a three year period for himself and his employees.

The CCE forfeiture provisions were all but swallowed up in 1984, when Congress expanded the substantive criminal forfeiture statute even beyond the civil provisions. Under ?? 853(a)(1) and (2), persons convicted of a felony drug offense forfeit all direct or indirect proceeds of the offense.

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More important, they forfeit any property "used or intended to be used, in any manner or part, to commit, or to facilitate the commission of a felony drug crime.

It would be difficult to draft a forfeiture statute broader than this new criminal statute. Under the civil forfeiture

provisions, drug-related property must fit within a specific category such as money, cars, real estate, or proceeds, and the forfeiture requirements differ among the categories. The criminal statute is easier to apply. You can forfeit any type of property used in any way to facilitate a drug felony. Though it is more than two years old, the criminal statute is often overlooked by prosecutors accustomed to separating their civil forfeiture cases from their criminal prosecutions.

Nonetheless, criminal defense attorneys should expect more often to confront criminal forfeiture counts as an inte?

gral part of drug-related indictments. The other commonly used federal forfeiture statute is the

criminal RICO statute, 18 U.S.C. ?? 1961-1968. As most

lawyers, public officials, business people, and low-level crooks know by now, the racketeering statute may apply to them and not just to guys with names like "Big Tuna."

Attempting to summarize in this space as complex a topic as RICO prosecution, defense, and forfeiture would be fu? tile. Still, here is a general notion of what RICO means.

Title 18, U.S.C. ? 1962(c), prohibits any person associ? ated with an "enterprise" from directly or indirectly partici? pating in the conduct of that enterprise's affairs through a

pattern of "racketeering activity," which is defined in ? 1961(1) to include a number of state and federal crimes

ranging from murder to mail fraud. An "enterprise" is

broadly described to include individuals, partnerships, cor?

porations, groups of individuals associated in fact, and so on. The RICO statute also prohibits using income derived from a pattern of racketeering activity to invest in an enter?

prise that affects interstate or foreign commerce. Section

1962(a). And it prohibits the acquisition of any interest in or control of such an enterprise through a pattern of racket?

eering activity. Section 1962(b). In addition to the traditional criminal sanctions of impris?

onment and fine, a RICO conviction results in mandatory forfeiture under ? 1963(a) of three categories of property: (1) any interest in the legal or illegal enterprise; (2) any property interest obtained through racketeering, whether in a RICO enterprise or not; and (3) any proceeds obtained

directly or indirectly through RICO violations. A convicted RICO defendant forfeits an interest in any

enterprise operated, established, conducted, or controlled in violation of the substantive statute, regardless of whether that enterprise was legal or illegal. Section 1963(a)(2); United States v. Turkette, 482 U.S. 876 (1981).

For example, in United States v. Busher, 817 F.2d 1409 (9th Cir. 1987), the owner of a construction company worth $3 million was convicted under RICO on the basis of mail fraud involving a small fraction of the company's total business. The district court ordered seizure of the entire company. The Ninth Circuit Court of Appeals held that the statute requires forfeiture of the defendant's entire interest in the company, even the "untainted" portion. It remanded the case, however, to determine whether the forfeiture was so disproportionate to the crime as to constitute unconstitu?

tionally cruel and unusual punishment. A similar argument

before the Fourth Circuit failed. United States v. Grande, 620 F.2d 1026 (4th Cir.), cert, denied, 449 U.S. 830 and 449 U.S. 919 (1980).

A criminal RICO defendant forfeits not only all interest in the RICO enterprise, but also any interest acquired through racketeering activity and any proceeds, income, or

profits obtained directly or indirectly through racketeering activity. Sections 1963(a)(1) and (a)(3); Russell v. United States, 464 U.S. 16(1983).

The important distinction between a RICO forfeiture and a civil forfeiture is that under RICO, it is not necessary for the government to trace proceeds from the illegal activity to the defendant. Consider the lawyer who was convicted un? der RICO for obtaining favorable tax assessments for his clients by bribing county officials. Although there was no evidence that any of the illegal profits were in existence at the time of the conviction, a forfeiture judgment was en? tered against him personally for his half of the $450,000 in fees that his firm received during a six-year period. The court justified a money judgment against the lawyer/racket? eer under RICO because, whether he put the profits in the bank or dissipated them on "wine, women and song," he benefited to the same extent. United States v. Ginsburg, 173 F.2d 798, 802 (7th Cir. 1985), cert, denied, 475 U.S. 1011 (1986). Now you know that anything can be seized. The next

question is how forfeiture is done. Lawyers who represent criminal defendants and other potential claimants must know the procedural quirks and pitfalls to avoid disaster. Let us start by contrasting civil and criminal forfeiture pro? ceedings.

The most important difference and the one that most sur?

prises defense attorneys is placement of the burden of

proof. Predictably, in a criminal case the burden is on the

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government to prove its case beyond a reasonable doubt. But in civil forfeiture cases, the burden differs markedly from what you might expect. In a civil forfeiture case, the

government's initial burden is merely to demonstrate prob? able cause to believe that the property is subject to forfei? ture. In this context, probable cause is "less than prima facie proof, but more than mere suspicion." 19 U.S.C. ? 1615; 21 U.S.C. ? 881(d); United States v. $38,000.00, 784

F.2d 694 (8th Cir. 1986). This is a modest standard. The United States usually satisfies the initial burden sim?

ply by filing its verified complaint. Then, the ultimate bur? den shifts to the defendant to demonstrate by a preponder? ance of the evidence that the property is not subject to forfeiture. 19 U.S.C. ? 1615; United States v. Fifty Thou? sand Dollars, 757 F.2d 103 (6th Cir. 1988). This is no small task.

Claimants in civil forfeiture cases cannot simply sit back, offer no evidence, and argue that the government's presen? tation was insufficient. Silence will ordinarily result in a

judgment of forfeiture. As Judge Milton Shadur put it, these rules do "carry a good deal of baggage, but that is the essential nature of burdens of proof." United States v.

$10,000 US. Currency, 821 F. Supp. 1253, 1255 (N.D. 111.

1981). As defendants prepare to meet the shifted burden of

proof, they discover yet another surprise: The government can show probable cause through otherwise inadmissible

hearsay, like a tip from a confidential informant. See United States v. One 56-Foot Yacht Named the Tahuna, 702 F.2d 1276, 1283 (9th Cir. 1983). The federal govern? ment can make a case against a client's property on the sole basis of arrest reports, without having or producing an eye

Ill a civil forfeiture case, the government's initial burden differs markedly from what you might expect.

witness. And if one cannot rebut this showing of probable cause, the government is entitled to summary judgment. United States v. $5,644,540.00, 799 F.2d 1387 (9th Cir.

1986). The upshot of these rules is that the government wins

most civil forfeiture cases without trial. Claimants who are concerned about self-incrimination or perjury problems typically choose not to testify. Claimants who do testify often tell transparently false stories. (The claimant who in? sisted that talk about purchasing "good shit" in intercepted telephone conversations referred to gold bullion, not drugs, told a story that simply did not ring true.) Usually claimants

merely challenge the government's probable cause showing or rely on a motion to suppress. If those tactics do not work, they give up. Because of the different burdens of

proof, even acquittal on the related criminal charges does not bar civil forfeiture in these cases. United States v. One Assortment of 89 Firearms, 468 U.S. 384 (1984).

The shifted burden of proof in civil cases diminishes the value of the Fifth Amendment privilege against self-in crimination. A property owner cannot pursue a claim with? out, in effect, testifying to ownership of the property. Claimants who allege an interest in property but refuse on self-incrimination grounds to provide details concerning their purported ownership lack standing to contest the for? feiture. Baker v. United States, 722 F.2d 817 (9th Cir. 1983).

The courts still are fighting about whether an adverse inference can be drawn from asserting the privilege against self-incrimination. In United States v. One Assortment of Firearms, 483 F. Supp. 16 (E.D. Tenn. 1979), an adverse inference was allowed; in United States v. $2,500, 689 F.2d 10 (2d Cir. 1982), it was not. The Supreme Court has not

provided a clear answer, although its decision in Baxter v.

Palmigiano supports the concept that an adverse inference in a quasi-criminal case does not impermissibly burden a claimant's Fifth Amendment rights. 425 U.S. 308 (1976). Whether the forfeiture is civil or criminal also will con?

trol when the property is seized. Seizure usually occurs at the beginning of civil cases, but not until the end of crimi? nal cases. That is because civil cases are considered in rem actions against the property itself. The court's jurisdiction depends on seizure of the "defendant." Criminal cases are in personam actions against the criminal defendant's inter? est in the property. The differences in timing of the seizures and in the burdens of proof explain why the government simultaneously files parallel civil and criminal cases over the same property. By proceeding on corresponding tracks, the government benefits from both statutes.

That does not mean that a defendant can retain property just because he faces only criminal charges. Although prop? erty subject to forfeiture ordinarily is seized after criminal conviction, both the criminal drug forfeiture statute and the RICO statute permit entry of a temporary restraining order, an injunction, and even seizure at or before indictment if the property may be unavailable for forfeiture absent an order. 18 U.S.C. ? 1963(d); 21 U.S.C. ?? 853(e) and (f). Both statutes provide that during hearings on whether pre? liminary relief should be granted, the court may consider otherwise inadmissible evidence. 19 U.S.C. ? 1963(d)(3); 21 U.S.C. ? 853(e)(3).

Also, discovery differs in civil and criminal cases. While

discovery is traditionally limited in criminal cases, the en? tire range of discovery, including depositions and document

requests, is available in civil forfeiture cases, which are

governed by the Federal Rules of Civil Procedure. The

prospect of virtually unlimited civil discovery entices both criminal defendants and prosecutors, but the risks usually outweigh the potential benefits until the criminal case is

completed. Criminal defendants balk at being deposed by prosecutors before their criminal trials, and prosecutors do not like to have their witnesses deposed either.

The leading case on discovery in parallel civil and crimi? nal cases is Campbell v. Eastland, 307 F.2d 478 (5th Cir. 1962), cert, denied, 271 U.S. 955 (1963). In Campbell, Judge Wisdom found that a "litigant should not be allowed to make use of the liberal discovery procedures applicable to a civil suit as a dodge to avoid the restrictions on crimi? nal discovery. . . ." 307 F.2d at 487. He suggested "harmo

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nizing" parallel civil and criminal cases by staying the civil case until the criminal prosecution finishes. In 1984, Con?

gress amended the civil forfeiture statute to conform to that

practice. 21 U.S.C. ? 881(i). Since both sides gain some?

thing by staying discovery until the criminal case ends, there is at least one point of agreement in the adversarial forfeiture proceeding.

The exclusionary rule applies in both civil and criminal forfeiture cases. One 1958 Plymouth Sedan v. Pennsylva? nia, 380 U.S. 893 (1965). For that reason, a motion to

suppress is often the best and the only defense. But it is no

panacea. Just as arguing the exclusionary rule in a criminal case does not assure dismissal or acquittal, use of the rule is not a complete defense in civil cases. If there is sufficient untainted evidence to demonstrate probable cause, the

property may be seized. United States v. One 1977 Mer? cedes Benz 450, 708 F.2d 444 (8th Cir. 1982).

As tough as the substantive, discovery, and evidentiary issues of forfeiture law may seem, it is the start-up proce? dure that most often ensnares defense lawyers. Forfeiture

procedure is so strange to most lawyers that some have

repeatedly missed the fundamental filing deadlines. One

attorney has forfeited a client's $110,000 Rolls-Royce and another client's house by committing threshold filing er? rors.

Here is what to expect. First, a federal agency (either the

Drug Enforcement Administration or the Federal Bureau of

Investigation) notifies the owner that his property may be

subject to forfeiture. Criminal defense attorneys do not nec?

essarily receive notice of a civil forfeiture, even when it relates to a pending criminal prosecution in which they have appeared; they must rely on hearing from their clients. The notice, which is both mailed and published, explains that there are two separate routes for seeking return of the

property. The owner can file either a "petition for remission or mitigation" or a "claim" that contests whether the prop? erty must indeed be forfeited. It is not unusual for lawyers to file only a petition for remission, never realizing that by that election they have foreclosed all opportunity to battle the forfeiture itself in a court of law.

You should file the petition for remission within 30 days of the notice of seizure. The petition must establish a good faith interest in the seized property, lack of knowledge or reason to believe that the property was being or would be used illegally, lack of knowledge that the owner had any criminal record or reputation, and that all reasonable steps have been taken to prevent illegal use of the property. 28 C.F.R. ? 9.5(b); 21 C.F.R. 8 ? 1316.78-1316.81. Filing a

petition for remission gives rise to a presumption that the

property is forfeitable. The petition appeals to the attorney general for an act of "executive grace." The petition route should be used only by the pristinely innocent?the lien

holder, the mortgagee, or the unfortunate parent whose new car is seized after his law-abiding teenage child completes an unprecedented night on the town. A decision on the

petition for remission is virtually unreviewable. United States v. $2,857.00, 754 F.2d 208 (7th Cir. 1985).

A petition for remission is not a claim and will not get you your day in court. To be certain of protecting an owner's interest, you must file a claim and contest the for? feiture in court. Yet, filing a claim is not always simple.

First, ask yourself whether the property has an appraised value of more than $100,000. The answer is your road map. Property worth less than $100,000 is subject, at least ini?

tially, to "summary"?or more properly, "administra?

tive"?forfeiture.

After receiving notice of the proceedings from an agency such as the Drug Enforcement Administration (by mail, publication, or personal service), anyone who wishes to contest the forfeiture in court must file a claim with the

agency within 20 days, along with a bond (10 percent of the value of the property, up to a maximum of $5,000). An affidavit of indigency may substitute for the bond. If you fail to file a timely claim and bond with the seizing agency, you will lose the property by summary or administrative forfeiture.

If you file the claim and bond on time, the administrative

proceedings end. Then, the matter transfers to the appropri? ate United States attorney's office to start "judicial" forfei

A claimant who insisted that "good shit" referred to gold bullion, not drugs, told a story that simply did not ring true.

ture proceedings. Generally, property valued at more than $100,000 bypasses the preliminary administrative stage and goes directly to this judicial proceeding.

There are two exceptions to the $100,000 dividing line:

Regardless of value, all vehicle forfeitures begin adminis?

tratively and all real estate forfeitures begin judicially. 19 U.S.C. ? 1607.

Judicial forfeiture is the only route into court to contest the merits or to raise dispositive issues like probable cause, suppression, or delay in instituting the proceedings. But even in a judicial forfeiture case, an experienced lawyer may encounter the unexpected. Judicial forfeiture proceed? ings are in rem cases governed not only by the federal civil rules, but also by the Supplemental Rules for Certain Ad?

miralty and Maritime Claims. And incorporated by refer? ence is the U.S. Customs forfeiture law, ? 881(d).

The case begins with the filing of a verified complaint. Under Admiralty Rule C(3), the court clerk may issue a warrant of seizure without prior judicial review. A number of cases have held that, notwithstanding the explicit lan?

guage of Rule C(3), the Fourth Amendment requires judi? cial scrutiny of the warrant application before seizure if the seizure would invade legitimate expectations of privacy and was not subject to certain warrant exceptions. Despite the flurry of litigation over this issue, it is of little practical consequence because by the time most judicial forfeiture cases begin, the property has already been seized. It is that earlier, initial seizure that should be the subject of a motion to suppress. Also, mooting this issue for most future cases, the United States attorneys' offices now are more regularly applying for judicial warrants.

Do not assume that you are on familiar ground just be

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cause your client is served with a complaint. This is not the

ordinary civil case in which a defendant need only file an answer. Under the Admiralty Rules, the defendant must file a verified claim within ten days after execution of process and also must file an answer within 20 days after filing of the claim. Failure to file either the verified claim or the answer on time leaves open the possibility of default judg?

ment.

In short, in the typical case, the property owner who wants to cover all the bases and get into the courtroom must file: (1) a petition for remission with the seizing agency, (2) a claim and bond with that agency, (3) a veri? fied claim in district court, and (4) an answer in that court. For a concise discussion of these pleading requirements and a vivid explanation of what can happen if you miss a beat, read United States v. $2,857.00, 754 F.2d 208, 218 (7th Cir.

1985). There, the Seventh Circuit affirmed summary judg? ment for the government because the owner of the money did not file a verified claim. The circuit court said that neither the district court nor the prosecutors had a duty to

notify the owner of shortcomings in his pleadings.

Good News in Criminal Cases The good news about forfeiture procedure in the criminal

context is that it is simpler for the defendant. The forfeiture

allegations are part of an indictment. Therefore, a not guilty plea preserves the defendant's rights. Because a criminal case is an in personam proceeding just between the govern? ment and the defendant, a forfeiture conviction determines

only their respective rights. The rights of third parties (like a bona fide purchaser of the property or a mortgagee) must be established in an ancillary proceeding.

Read 18 U.S.C. ? 1963(1) and 21 U.S.C. ? 853(n) for the

third-party ancillary proceedings under the RICO and criminal drug forfeiture statutes. After a conviction under either statute, the government seizes the property (if it has not already done so) and publishes a notice of the criminal forfeiture order. It also may mail that notice to known inter? ested parties. If you represent one of those parties, within 30 days of that publication you should petition the district court for a hearing on your client's interest in the seized

property. The burden of proof is on petitioners to show by a

preponderance of the evidence that (1) they owned the

property before the acts giving rise to forfeiture or (2) they were good faith purchasers who, at the time of the pur? chases, were "reasonably without cause to believe that the

property was subject to forfeiture." 18 U.S.C. ? 1963(1)(6); 21 U.S.C. ? 853(n)(6).

As a lawyer, you may well have a stake in these third

party procedures in criminal forfeiture cases. A third party may be any owner, lienholder, mortgagee, purchaser, or

assignee. That includes the owner of a car who innocently loans it to a friend who drives it to the site of a drug deal. It also includes the drug dealer's spouse who jointly owns the home where the dealer stores illicit drugs. And it includes the lawyer who receives, or is owed, fees by a drug or RICO defendant.

Historically, innocence of a third-party claimant was not a defense in forfeiture cases because the proceeding was in rem and supposedly against the "guilty" property itself. This concept persists today, although there are exceptions,

especially in the more recent amendments to the forfeiture statutes. Each of the civil and criminal statutes we have discussed contains a "relation back" provision that vests title to the forfeited property in the United States as of the

moment the bad acts were committed. 18 U.S.C. ? 1963(c); 21 U.S.C. ?? 853(c) and 881(h). Still, third-party interests are recognized to some degree in each statute.

The civil statute is the harshest, and the vehicle portion of that statute supports the most extreme results. For ex?

ample, the Supreme Court has upheld the civil forfeiture of a leased yacht used without its owner's knowledge or per? mission to "transport" one marijuana cigarette. The Court announced "the principle that statutory forfeiture schemes are not rendered unconstitutional because of their applica? tion to the property interests of innocents." Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 680 (1974). The only recourse for these innocent third parties is a peti? tion for remission.

For other categories of forfeiture, there are statutory pro? visions to protect the rights of third parties. In criminal forfeiture cases, there are the ancillary proceedings. In civil cases under 21 U.S.C. ? 881(a)(6), money or proceeds are

exempt from forfeiture if the owner can establish that the acts giving rise to the potential forfeiture were committed without the owner's knowledge oar consent. The civil real estate forfeiture statute contains an identical provision that often comes into play when a jointly owned house is used as the site of a drug transaction.

Innocent third parties still must comply with the same deadlines as the criminally involved party for filing peti? tions, administrative claims, judicial claims, and answers. If

you represent a remote third party whose property has been seized, contact the prosecutor assigned to the case as soon as possible. Often only a phone call is necessary. Despite the shocking legal results in this field, the goal of the forfei? ture statutes is to hurt the bad guys, not to penalize the innocent. Most prosecutors will work hard to avoid injury to faultless bystanders.

Here is an idea of the government's flexibility. When the innocent spouse of a drug dealer jointly owns a house, the

government may sell the house and give the spouse an ap? propriate share of the proceeds. In some cases, especially if children are living in the home, the government simply assumes the dealer's forfeited position as joint owner and

permits the innocent spouse and family to live in the house. In fact, the government's heart is probably softest when it comes to kids. Where children's welfare is at stake, implore the prosecutor to forgo the forfeiture. Sometimes it works. But, get any agreement from the prosecutor in writing. Oth? erwise you must file a timely protective claim and petition. And you only have ten days to file the claim, so act swiftly.

Where attorneys' fees are involved, there is case law to

support both the government's and the defense bar's posi? tions. Each of the forfeiture statutes in some way provides for the interests of third parties. The government's interpre? tation of the statutes is that an attorney should not keep forfeitable money paid by a racketeer or drug dealer unless the attorney was entirely without reason to believe that the

money was subject to forfeiture. In response to concerns raised by the defense bar, the Department of Justice last

year issued guidelines on the forfeiture of money or other

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assets transferred to an attorney in payment for legal serv? ices. 38 Crim. L. Rep. 3001 (BNA Oct. 2, 1985). Under those guidelines, forfeiture of attorneys' fees is authorized under three circumstances:

(1) When the "fees" are not really fees, but a sham trans? action to shield assets;

(2) When the fees were for representation in a civil mat? ter and the attorney had reason to know that the money was

subject to forfeiture; and

(3) When the fees were for representation in a criminal matter and the attorney had actual knowledge that the

money was subject to forfeiture. The guidelines also restrict the use of compelled disclo?

sures of confidential communications between attorney and client to prove that the attorney knew, or should have known, that the fees were paid with tainted money.

The government considers its guidelines well within

statutory and constitutional limits. The reasoning goes like this: Because forfeiture relates back to the commission of the acts giving rise to it, right to the money involved in illicit drugs or racketeering transfers to the government at the moment it is used or acquired illegally. From then on, the money is the government's. The defendant cannot keep it or spend it, even on attorneys' fees.

On the other side, the defense bar argues that the statute should not be read literally to forfeit money paid as attor?

neys' fees. Defense attorneys say that preventing a criminal defendant from using ill-gotten gain to hire a lawyer vio? lates the Sixth Amendment right to counsel of choice. This

position got at least a temporary boost in United States v.

Harvey, 814 F.2d 905 (4th Cir. 1987). Though the panel

Where children's welfare is at stake, implore the prosecutor to forgo the forfeiture.

decision rejected the defense bar's statutory construction

argument, it ruled that the RICO and CCE statutes do vio? late the Sixth Amendment's qualified right to counsel of choice to the extent that they deprive an accused of the

ability to pay legitimate attorneys' fees to private counsel. The Fourth Circuit sitting en banc, however, overturned the

panel and held that forfeiture of attorneys' fees does not violate the right to council of choice. In re Caplin &

Drysdale (4th Cir., en banc, Jan. 11, 1988). The Second Circuit also has closed the door to claimants

on this issue, but not all the way. In United States v.

Monsanto, 2d Cir., Dec. 21, 1987, the court held that in a criminal forfeiture case, before the government can re? strain assets that would otherwise be used to pay attorneys' fees, it must establish at an adversarial hearing a likelihood of success on the merits. If the government fails to obtain the restraining order, according to the Second Circuit, it cannot later recover the fees paid regardless of its ultimate success at trial. The court also would permit a defendant made indigent by a restraining order to pay private counsel of choice from restrained assets but at Criminal Justice Act

rates on the theory that the government would be paying those fees in any event. As long as the attorneys' fees ques? tion remains unsettled, defense attorneys should consider

filing motions in both criminal and civil forfeiture cases to exclude sufficient funds to pay their own fees.

Here are some suggestions for the defense of civil forfei? ture cases. This is not an exhaustive checklist, but it will

help you avoid the most common errors. 1. Meet all filing deadlines. In a civil case, a verified

claim must be filed within ten days of the date notice of the seizure is published.

2. If you represent a claimant not connected to the illegal activity, contact the prosecutor at once to see whether an

equitable arrangement can be made with a minimum of expense to your client.

3. The best defense in civil cases, as in criminal drug cases, often is not on the merits. It is a motion to suppress. This motion should be made as early as possible.

4. Assess the sufficiency of the complaint. If insufficient facts are pleaded, file a motion to dismiss. It probably will not result in dismissal, but it should force the government to file an amended complaint that gives you more informa? tion.

5. Face the fact that the odds are against the defendant in a typical forfeiture case. Assess your client's chances as

early as possible. The government may bring these cases for policy reasons, but for your client, the case is about money. We see many cases in which a great deal of money is spent litigating clear losers. Try not to throw good money after bad.

6. Most prosecutors are more than willing to show you their hand, or at least most of it, to convince you to aban? don your claim. Talk to the prosecutor about your case. That is not a complete substitute for full-scale discovery, but it is a cheap and useful alternative at the early stages of the case.

7. Consider the impact of the forfeiture on parallel crimi? nal proceedings. Request or agree to a stay of civil discov?

ery if necessary. 8. If the case must be tried on the merits and the expense

of discovery is warranted by the amount in issue, be sure to

depose the government's witnesses or, at a minimum, ob? tain their written statements. Criminal defense attorneys of? ten fail to take advantage of the more liberal civil discovery rules.

9. Consider the possibility of settlement, but do not get too excited about it. Because of the principle involved, the

government generally is not inclined to settle forfeiture cases. They do not have a nuisance value. Nonetheless, they occasionally settle when the government faces clear

litigative risk. Since the money or property necessarily means more to the claimant than to the government, though, expect to pay a premium to settle.

10. If you lose at trial and want to appeal, be sure to seek a stay. Failure to do so may result in loss of appellate jurisdiction.

There is no escape route from the house of horrors that forfeiture laws create. But knowing what lurks in the shad? ows will help you to brace yourself and your client, and will permit you to respond quickly with the most effective defense. 10

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